Science Applications International Corporation (SAIC) (IT Consulting)

Science Applications International Corporation (SAIC) is a Fortune
500 scientific, engineering and technology applications company
that solves problems of vital importance in national security,
energy and the environment, critical infrastructure and
health. The company's approximately 45,000 employees serve
customers in the U.S. Department of Defense, the intelligence
community, the U.S. Department of Homeland Security, other U.S.
government civil agencies and select commercial markets. The
firm has had a hand in some high profile government projects over
the years, including the clean-up of Three Mile Island and the
manufacture of the Hubble Space Telescope. Around 500 U.S.
federal, state and local agencies are on its client list, and
nearly half of its employees carry some level of national security
clearance. It's no surprise, then, that government contracts
have accounted for more than 90 percent of SAIC's revenue in the
last three fiscal years, including 95 percent of 2009's $10.1
billion total.

While services to government clients cover a broad range of
technical and scientific support, in addition to IT consulting and
infrastructure solutions, SAIC's projects for commercial clients
tend to be focused solely on IT services, such as applications and
IT infrastructure management, data lifecycle management and
business transformation services. Commercial work, which
accounted for the remaining 5 percent of revenue in 2009, is
conducted within the oil and gas, utilities and life sciences
sectors.

Essential components

The firm was founded in 1969 by J. Robert Beyster, a Ph.D.
physicist who came in with just two contracts and the notion that
the employees should own the company. As staff joined up,
Beyster promised to carve out stakes in the firm based on
individual contribution, though he assured them that this was not a
means of getting rich quick. At the end of the first year, he
had parceled out 90 percent ownership in the enterprise.

Making SAIC work was no easy task, however. With such a
small operation, the scientist-owners had to fill in as the
marketing and sales teams for the very work they were doing.
Before the firm turned profitable in 1970, Beyster and some
employees had liens placed on their homes. Beyster continued
to recruit committed workers willing to take the long view, and
contracts and revenue finally began to multiply. The owners
may not have gotten rich quick, but they certainly got rich: By the
end of the 1970s, SAIC was a $100 million firm. Today, it's a
multi-billion dollar firm with locations in 150 cities
worldwide.

The pick-up game

SAIC has augmented its growth and success over the years through
acquisitions. In the last six fiscal years, it has purchased
almost 30 companies. In one of the most recent examples, it
acquired Maryland-based SM Consulting, Inc. The deal, which
closed in May 2008, enhanced the firm's IT consulting capabilities
and added a unique dimension with linguistics services, such as
translation and intelligence training. In April 2008, SAIC
picked up Icon Systems, Inc., a provider of laser-based systems and
products.

A major past transaction that helped shape the firm was the 1994
purchase, for $4.5 million, of Network Solutions. The
acquisition was extremely timely, as the company was in charge of
the registry for Internet domain names. Network Solutions
would go on to raise billions in an IPO spinoff in the late 1990s,
and in 1999, VeriSign forked $21 billion for SAIC's majority
stake. Not bad for an original investment of less than $5
million!

Through a venture capital arm founded in 2000, meanwhile, the
firm also seeks beneficial strategic collaborations, making
minority investments in strategic emerging technologies with a
tangential interest to SAIC's areas of expertise. That has
led the firm to projects such as a joint venture with engineering
giant Bechtel to create a new nuclear waste repository at Yucca
Mountain in the Nevada desert, a project that likely faces some
considerable political opposition, not least from Senate Majority
leader Harry Reid, who represents Nevada, and who seemed to have
succeeded in getting much of the proposed Yucca Mountain funding
trimmed from President Obama's first budget as of March 2009.
At other times, the venture capital arm may make outright purchases
for the firm, as well, leading to companies such as Eagan
McAllister Associates and Benham becoming wholly-owned subsidiaries
of SAIC. (The former is a tech, engineering, management and
logistics company that mainly serves branches of the U.S. military,
while the latter is a full-service planning and design firm that
serves the federal government).

Public, but not too public

SAIC made its IPO in October 2006, bringing in more than $1.2
billion. The original ideal of employee ownership was able to
persist, however, with staff still holding about 80 percent of the
company. And new hires are not left out in the cold, as they
are able to take advantage of a certified employee owner program
(often appealingly abbreviated as "CEO program"). The program
imparts information on the company's values, business goals and
legacy of ownership.